Getting a Carrier Appointment for Start Up Agencies
Posted: Sun Jul 17, 2011 9:27 pm
Getting a carrier appointment for a new independent agency is not easy. Carriers want to see an existing book of business or a commitment to a certain premium volume within a certain time frame. Thus, becoming part of a group that has master agency contracts is the way to go in most cases. There are exceptions to this; if you are a producer with an existing book of business and your contract allows you to take the book, then the appointment possibilities increase dramatically. That’s because most carriers don’t want to lose that book to a book roll.
Most will want to see your business plan, and it would also be best to include your previous loss ratios — especially if they are well documented (such as with captive agencies) and the numbers look good. You should also include 5-year projections along with production goals. Nevertheless, it will probably be difficult to get many of these appointments as a startup, particularly with the national carriers.
Another option would be to do business with wholesalers. These may include managing general agencies (MGA) and surplus lines brokers. Be aware of some potential issues, especially if you are targeting a preferred class of clients. Most wholesalers do well at high-risk or hard-to-place accounts rather than preferred-type accounts. Some firms, such as Insurance Noodle, which does nearly all of its business through an online portal, do preferred policies. There are also some wholesalers who have preferred contracts. If you intend to specialize in certain commercial risk, it makes sense to partner with wholesalers doing the same, especially if the specialized risk is not widely available in the preferred market.
It may be possible to eventually roll your book into a carrier directly once you have built up a book with a wholesaler. However, some wholesalers have agreements with their carriers in which a broker of record is not allowed. For other carriers, the wholesaler is the underwriting and marketing arm. While there are many options, the best option of all if for a start-up agency to join a cluster, alliance or network group, which uses the power of the group to secure appointments rather than the individual agency.
Most will want to see your business plan, and it would also be best to include your previous loss ratios — especially if they are well documented (such as with captive agencies) and the numbers look good. You should also include 5-year projections along with production goals. Nevertheless, it will probably be difficult to get many of these appointments as a startup, particularly with the national carriers.
Another option would be to do business with wholesalers. These may include managing general agencies (MGA) and surplus lines brokers. Be aware of some potential issues, especially if you are targeting a preferred class of clients. Most wholesalers do well at high-risk or hard-to-place accounts rather than preferred-type accounts. Some firms, such as Insurance Noodle, which does nearly all of its business through an online portal, do preferred policies. There are also some wholesalers who have preferred contracts. If you intend to specialize in certain commercial risk, it makes sense to partner with wholesalers doing the same, especially if the specialized risk is not widely available in the preferred market.
It may be possible to eventually roll your book into a carrier directly once you have built up a book with a wholesaler. However, some wholesalers have agreements with their carriers in which a broker of record is not allowed. For other carriers, the wholesaler is the underwriting and marketing arm. While there are many options, the best option of all if for a start-up agency to join a cluster, alliance or network group, which uses the power of the group to secure appointments rather than the individual agency.